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What to expect from the property market in 2022

Against all odds and predictions, the Australian housing market (and Sydney in particular) bounced back healthily after fears that COVID-19 would finally burst the property bubble. In fact, according to sales data, Sydney’s property rising rose by 6.3% over the last quarter, and the city’s auction market is still going strong, clearing over 90% of auctions.

But what can we expect through 2021 and as we head into 2022?

Housing prices will continue to rise

A recent report by ANZ bank has predicted that Sydney’s housing price will continue to rise 19% through 2021 before slowing down to 6% in 2022. Furthermore, most segments such as suburbs and regional areas will show a substantial price appreciation while the price rises are expected to be more significant for houses as opposed to units.

Meanwhile, according to the Commonwealth Bank, Australia is on the “cusp of a housing boom”, and they expected house prices to increase 16% over the next two years, rising 9% in 2021 and a further 7% in 2022.

The bank’s Head of Australian Economics, Gareth Aird, posits that this is because “The boom is being driven by record low mortgage rates coupled with a V‑shaped recovery in the labour market.  Borrowing rates, which are the single biggest driver of prices in the short run, remain below the rental yield in most markets across Australia. This is an unusual situation and means that property markets across the country need to find an equilibrium. For the bulk of Australia, equilibrium will be achieved via further dwelling price rises.”

Of course, these predictions are based on the assumption that the cash rate remains at its low rate of 0.1%, which has been placed in line with the Reserve Bank of Australia, stating a firm commitment to the 0.1% cash rate until at least 2024.

Prudential measures will be introduced

According to ANZ senior economist, Felicity Emmett, the Australian Prudential Regulation Authority (APRA) will introduce macro prudential measures to slow house price growth into 2022.

“Housing construction and equipment investment are likely to turn lower in late 2022 as the activity brought forward by government incentives dries up … low population growth will also weigh on growth. [That said] Fiscal policy will be winding back, but measures put in place to support housing and investment will support growth in 2021 and early 2022”.

Justin Fabo, senior economist at Macquarie Bank, agrees, stating, “The prudential regulator is probably already waving the big stick around inside the banks and behind closed doors”.

It appears that predictions are divided as to what 2022 will hold. While many agree that property prices will continue to rise throughout 2021, the following year may see the market slowing down. However, it would appear that Australia’s property value trajectory will continue.

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